Blackstone’s Tony James Opines On Economy, Election, Tax Reform

The third quarter was bad for the public markets, and Blackstone Group wasn’t immune to the impact. The NYSE-listed firm posted an economic net loss of $342 million for the quarter, compared with net income of $339 million in the same period of 2010.

The loss was primarily due to mark-downs across Blackstone’s various businesses including private equity, partially offset by an 18% increase in management and advisory fees over the year-ago levels.

On a conference call with reporters this morning, President Tony James acknowledged that the quarter was challenging, lowering exit prospects.

James said Blackstone “completely ignored” the analyst’s report, noting that Blackstone focuses on doing “the best possible job for limited partners.” He added that volatility in the firm’s stock hasn’t had much of an impact on its day-to-day operations. Blackstone went public in 2007 at $31 per share. The stock recently traded at $13.38, up 14 cents.

Meanwhile, James said Blackstone is seeing greater deal flow in distressed credit, mezzanine debt and real estate, as well as in international markets such as Europe and India. He said he anticipates the current environment to remain sluggish for some time to come.

“Our general view is stagnation,” he said. “Things are not falling apart, but there isn’t much by way of growth, either.”

James also shared his thoughts on the ongoing debate over the U.S. budget deficit. “I don’t see how this country can get out of [its deficit] without a combination of spending cuts, increasing taxes, and probably inflation.”

“All affluent people in the United States will pay more taxes – and they should,” James said, adding half-jokingly that, “Don’t tell Steve [Schwarzman] I said that.”

Schwarzman, Blackstone’s chairman, is ranked 66th on the Forbes 400 richest people in America this year – the top-ranking private equity baron.

James also mentioned the 2012 presidential election. GOP presidential candidate front-runner Mitt Romney’s job-creation record has been repeatedly challenged by critics who question his experience as co-founder of Bain Capital. James acknowledged that Democrats, bent on winning re-election, will run an “extremely negative campaign.”

“Private equity will be villainized by the Democratic machine,” James said.